Insurance Commissioner Dave Jones Applauds Governor for Signing SB 1216
News: 2012 Press Release
Insurance Commissioner Dave Jones today announced that Governor Jerry Brown has signed SB 1216, authored by Senator Alan Lowenthal (D-Long Beach). The bill is sponsored by Commissioner Jones and the California Department of Insurance, and updates California insurance law in response to changes in federal law and revisions in the National Association of Insurance Commissioners (NAIC) Reinsurance Model Law and Regulations.
"I am pleased that Governor Brown has signed this important legislation," Commissioner Jones said. "Globalization has resulted in many changes to the business practices of insurance and SB 1216 will ensure that the Insurance Commissioner and the Department of Insurance have the authority and regulatory tools needed to protect consumers in response to the changing business practices in the area of reinsurance."
SB 1216 will align existing California insurance law to define a professional reinsurer and the credit an insurer may take for a reinsurance transaction to that of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and NAIC Reinsurance Model Law and Regulations . Reinsurance is insurance purchased by an insurer from another insurer for all or a portion of loss that may arise under one or more of the insurer's policies. Since reinsurance involves a transfer of liability, it is often used by insurance companies as a risk management tool. Policyholders are generally unaware of the reinsurance transaction and any direct action they may have on the policy remains with the original insurer.
The NAIC's recently amended reinsurance Models reflect efforts by the states to modernize reinsurance regulation, including responding to Dodd-Frank changes. A key provision of the NAIC changes relates to the certification of a non-admitted reinsurer. Under the revised NAIC Models, each state has the authority to certify a reinsurer or to recognize the certification issued by another NAIC-accredited state. As part of the certification process, a rating system provides for certified non-U.S.-based reinsurers to reduce collateral under specified conditions. The certification process is pivotal to permit a California domiciled ceding insurer to qualify for a credit on its financial statement under these new conditions.
"I would like to thank Senator Alan Lowenthal for authoring this legislation and Governor Jerry Brown for signing it," said Commissioner Jones.
The measure will become effective January 1, 2013.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.